Nissan was allegedly promised to receive a huge incentive from the state government to set up a car production plant
Nissan has filed a lawsuit against India seeking an amount of more than $770 million (Approximately Rs. 5,000 crore) over an unpaid state incentive issue. The automaker claims, this incentive was promised to the brand back in 2008 by Tamil Nadu government for setting up a car manufacturing plant in the state and the incentive was vital for the project’s viability and sustainability.
Nissan also says that despite its repeated requests to the state officials for the payment, the state government didn’t pay heed. Even Renault-Nissan Alliance chairman Carlos Ghosn too requested Prime Minister Narendra Modi for federal assistance on the issue. But, that effort too didn’t bring any positive result.
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Federal officials from several ministries assured Nissan that the payment will be made and two sides shouldn’t not enter into a legal battle. However, in August Nissan moved international court to resolve the issue and it gave India an ultimatum to appoint an arbitrator. Now the first arbitration hearing will be in middle of this month. Speaking about the issue, a senior Tamil Nadu government official has said they are working to resolve the dispute.
Currently, there are more than 20 international arbitration proceedings going on against India by international investors and Nissan’s lawsuit comes as the latest one. This dispute between the Tamil Nadu government and Nissan indicates toward the difficulties the companies face while investing here. While the central government has been trying to lure the investors to invest here, such disputes surely make dent in the country’s image.
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Tamil Nadu capital Chennai has been one of the major auto hubs in Asia and it has even earned the nickname ‘Detroit of South Asia’. But, such incident could affect the image of the city and the state as well. Presently, several automakers including global majors like Ford and Hyundai have their production hubs in the state.